Suburbs such as Fitzroy and East Melbourne have historically strong capital gains. Conventional wisdom is that by investing in neighbouring suburbs that have lower median prices, an investor would achieve stronger growth than in the blue chip suburb. This is because they would benefit from the spillover effect of buyers being unable to afford the blue chip locations and the subsequent gentrification of the suburb. This bulletin aimed to test if this is the case by analysing the growth of 5 bride and bridesmaid suburb pairs in inner Melbourne.
A bride suburb is a relatively expensive suburb with good capital gains. It may be out of reach for a large proportion of property investors due to the high entry point.
A bridesmaid suburb is a neighbouring suburb that boasts a lot of the qualities that make the bride such a good investment, yet with properties selling for much lower prices.
To compare, the median sale prices and annual growth rates since 2011 for all suburbs shown in Figure 1 were gathered. These suburbs were divided into suitable pairs, based on locality and differences in median prices. The results are shown in Table 1.